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First Business

News/Business. Insight on the economy and stock market. (CC)

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00:30:00

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mpeg2video

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ac3

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Us 4, John Bintz 3, Dr. Gaziano 2, Jeffrey Friedman 2, Andrew Keene 2, S&p 2, Dell 2, Thomson Reuters 2, Technomic 2, John Bougearel 2, Usa 2, Texas 2, Airline Industry Etx 1, Unkined 1, Potash 1, Eas 1, Research Group N 1, Dominic Gaziano 1, Mcdonalds 1, Applebee 1,
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  FOX    First Business    News/Business. Insight on the  
   economy and stock market. (CC)  

    September 7, 2010
    4:30 - 5:00am EDT  

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id theft protection to contacting elected officials. student loans to taxes on-line. whether you have information to get or ideas to give, usa.gov is the official place to connect with your government. from surplus car auctions to finding a new job, our new mobile apps will keep you updated on the go. so from marriage records to passport applications, veteran's benefits to birth certificates, patent applications to energy saving eas, product recalls to home buying tips, check out usa.gov. because the country runs better when we stay connected. today on first business get ready to hear *new ideas from the president on boosting job creation. plus one restaurant
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owner tells how he managed to keep his business open during the recession and why some are optimistic after the latest jobs report it's all ahead on today's first business. you're watching first business: financial news, analysis and today's investment ideas welcome to another season of first business broadcast television's premier source of daily financial news and information. it is tuesday september 7th. we would like to extend a warm greeting to our newest affiliate's from california to virginia as well as all the countries served by our international bbg satellite network. september is shaping up to be a good month for stocks. that is definitely far from the norm. here's a quick trick that some traders use to get a feel for what's gone on with the economy and the markets. they take a look at the xal. this is the airline industry etx. it is a basket of airline stocks. during the past few days it has rallied in a few
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dollars and over the last year it has nearly doubled. airlines are very much tied to what's going on with the economy. hopefully they will continue to be profitable. in the meantime bp's oil cleanup costs have reached $8 billion. this week, president obama said he will unveil new ideas to boost job growth he plans to make another announcement in the days ahead where he will talk about a broader package aimed at accelerating job creation so far this year, more than 700-thousand jobs have been created both in the government and private sectors.the president once again called on congress to pass a small business jobs bill when it gets back into session later this month.the bill would set up a 30 billion dollar lending fund so that small businesses can borrow money to grow their companies.it would also eliminate capital gains taxes on key investments and provide $55 billion in tax cuts for businesses that create
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jobs in the next 14 months the bill would be paid for by the tarp program that was set up in 2008 to bailout banks. but, there's been a lot of opposition to that idea. meanwhile, small business owners have said they are putting off hiring decisions because of continued economic uncertainty.in a recent survey, 78% of small business owners questioned said they have no plans to do any hiring. the restaurant industry continues to feel the effects of the recession.research group n- p-d reports nearly all restaurants that closed during the down turn in the economy were independently owned. we caught up with one owner who shared some key ingredients helping to keep his new business on the front burner with consumers. broll in angie jobs salute winebar and cafe in chicago opened during the recession and it was questionable whether this would be a business that would soon flicker out.dominic gaziano who is also a medical
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doctor-- admits as a first timer in the restaurant biz--and with consumers closely watching what they spend-- he turned to mentors stat. -- but then 2 of the mentors restaurants fizzled out." so nobody knows how to do it in recession, this deep recession that we are experiencing now. reporter: your mentor's businesses failed? correct. so i was a little bit on my own for a while. " during 2009 restaurant consulting firm technomic reports the food service industry was down 3.5%. in may of 2010 the firm predicted the restaurant industry could grow .6% this year. " it's going to take a a couple of years before we see pre-recession numbers, so i guess it's good news, bad news. we are starting to see a recovery-- but it's not going to be a rapid recovery."as mom and pop type restaurants
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struggled during the recession... technomic recently revealed restaurant chains and franchises such as mcdonalds, pizza hut and subway were growth drivers. the top 400 franchisors generated $31.8 billion in sales in 2009. up 1.6% from 2008. " the independents that have a local niche or a strong local following. you even see applebee's promoting that it's in the neighborhood. " the name "salute" means cheers in italian.. giving this winebar and cafe a cozy feel.initially i wanted it to be a high end it came out the neighbors wanted it to be a bistro.that's not all dr. gaziano beefed up the menu with comfort food which has been a big seller. and he offers free advice to others considering-- going into the
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restaurant business. you have to have things of value do promotions do specials.. look at everyday as a new challenge.dr. gaziano says he did learn about operating a restaurant the hard way translation he took some hits financially.. but he adds it's possible salulte will turn a profit in a few months... let's check in with jeffrey friedman, lind-waldock. we have light economic data this week and the big institutional traders are supposed to be back in full force. what do you think that means for volume? that means a increase in volume because they were not participating for the last month and definitely in the last two weeks. we are looking for more volume. and a commitment to the upside. we need to break up through 1120 to 1125 in the s&p
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for them to really be encouraged and chase the market in. do you think the whole month of september can actually turn out to be positive for stocks? yes i do but usually historically it is unkined to the bulls september and october but this time around because we have been so low in august it will be a positive. we will be in a trading afair it will not go one way but i think buying dips is the way to go. do you think investors are convinced the economy will be ok? i think they are starting to but it is a long road back. just two or three weeks ago we were very pessimistic and people were talking about double dip. now all of a sudden we may be on our way. we need some more encouraging news from political structure as well as tax relief maybe. we will see if we can break through on the charts and get above 1125 in the s&p. we have a long road back and this is only the beginning. thank you very much for joining us
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jeffrey friedman, lind-waldock. the newly formed bureau of ocean energy management says it's launching a full investigation.into the oil platform that caught on fire last week in the shallow waters of the gulf of mexico.13 people were rescued no one was injured.the department's new "investigations and review" unit will lead the probe.texas company mariner energy owns and operates the platform located 100 miles south of louisiana.the company stopped the flow of oil to the platform it's out of commission until the investigation is complete.federal investigators are still trying to find out whether or not any oil is leaking from underground wells tied to the platform. still to come from technology to healthcare what's fueling so many mergers these days that's
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coming up later. but first we breakdown the latest jobs numbers...
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it was more surreal than anything. you're under fire. you're getting blown up. there's definitely adrenaline. there was the explosion, and i remember just opening my eyes, and it got both of my legs. i had surgery after surgery, you know, i was on a lot of pain medicine. "what's going to happen next? and how long am i going to be here?"
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the wounded warrior project dropped off a backpack for me. and it had everything in there that i could possibly have needed at that time. peer visitors, people who have been where i had been before, said, "look, brother, "everything's going to be okay. "three months from now, or four months "from now, a year from now, you'll be fine." that type of thing was an invaluable service. to be honest, i don't know if i would be as well adjusted as i am now if it wasn't for them. to learn more, call... or visit woundedwarriorproject.org. welcome back everybody we are now joined by john bougearel / structural logic to talk about the jobs market. is there anything in this recent jobs report that tells you the labor market is on the right track? we are seeing a private sector growth offset some of the weakness in the government job
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sector that is positive because there is more jobs being created in private sector than the government is losing. i'm finding the biggest encouragement in the manufacturing sectors employee index. on wednesday we found that the august employee index in the manufacturing sector jumped over 60. the first time this ever happen in the last decade was in 2004 shortly after that happened we saw 300,000 jobs created be. so that looks good when it comes to job growth in the private sector. let's take a closer look at the manufacturing sector's jobs. this past august we lost jobs in the manufacturing sector for the first time since 2009. does that give you any concern? in the middle of the summer we had a lot of uncertainty with the
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regional businesses and the philly sector kansas sector and texas sector. they were all weakened by hurricanes and the gulf oil spill. a little slowdown in the shedding of jobs could be related to seasonal stuff. i am not sure we want to make a big deal about 1 months shedding of jobs in the manufacturing sector. especially when the manufacturing sector's employee index is up so high. let's take a look at the overall private- sector job growth. it is still averaging under 100,000 jobs each month in 2010. is that enough to make a dent in the unemployment rate? no it is not and we can expect the unemployment rate to go up if discouraged job seekers return to the market. we are seeing
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indications that more people are returning to this job market, we are also seeing more temp workers being hired. people are leaving the discouraged workers sector. they are about 300,000 people who had temporary jobs but now do not have them. there are numbers that suggest they are back in the temp market now and we hope that is the case. we also hope that those temporary jobs convert to long term employment. let's go over those numbers. the question is whether these part-time jobs turn into a temporary jobs and when do you think that will happen? we hope that happens sooner rather than later. we have a structural unemployment issue here in our country and 300,000 returning to the jobs
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market is a small number. we need to be hiring people at a rate of 200,000 or 250,000. we need to create those types of jobs every month in the private sector and we are not there but we are starting to be encouraged. for now many people are describing this job market as stuck in neutral. would you agree with that? it is very much stuck in neutral. we cannot expect a rapid growth. i am looking foreword to additional signs that we will see job growth in the private sector given the fact that the employment index is over 60. we saw that happen in the spring of 2004. let's try to be optimistic. thank you for joining us john bougearel / structural logic. still ahead what's behind the recent wave of we'll talk about that after the break
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it's been merger mania in recent months with take over bids in the technology natural resources and health care sectors earlier we spoke with john bintz of valuation research corporation about what it all means for the markets. it has been a merger mania in the last couple months. with takeover bids in the technology, natural resources and health-care sectors among others. we are now joined by john bintz, valuation research
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corporation. u.s. companies are sitting on about two trillion dollars in cash. why are they using that money to make these acquisitions at this time. i think when you look at their cash positions which is good. they also have seven trillion dollars in debts. so if you subtract the cash position from the debt it is still relatively high. but companies and private equity firms that have allot of cash need to put that money to work. the board of directors, investors and limited partners as well as private equity funds do not want you to sit on cash. cash is yielding 2 1/2%. what about today's environments? they make these takeover candidates and very attractive. i do not think the multiples are really that cheap but i think they want to look at hot sectors they you have mentioned. health
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care, technology and energy or natural resources and even the emerging markets. if you are coca-cola and have a wonderful brand but you want to expand to africa. you'll have to look at those specific areas or sectors in the world or industries that you could capitalize on. should investors be looking at those specific areas if they want to invest in the stock market? absolutely should. fixed stocks in those sectors? yes or a mutual fund that covers that particular industry sector. what about the fact that it is cheaper to borrow, is that playing a role in this? yes corporations can go out and borrow money really really cheap and if they can buy a company and get a return of 5 to 7% they have a positive arbitras because they are barrowing money at 3%. so a lot of companies are going into the debt markets and raising capital through them. it is a cheap form of financing today. what is the main goal of the acquisition for the companies that are taking over the others? i think there are a
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couple reasons. the first one is to spread market share, another one is to take advantage of the the synergistic overlap they may have and the redundancies on the administrative side. maybe they can cut 20% on the expense side and then have additional topline revenue and capitalize to have a accretive type of situation when they do an acquisition. you buy a company at the six multiple but your company is trading it at 19 pe you are going to have an accretive situation. when these companies do cut costs to eliminate overlap is that not bad for future job growth? in the short run yes and in the long run we do not know. about 50 percent of strategic and financial acquisitions do not make sense. the ones that are positive cut people in the short run but in the long run it's a healthier company. do these companies face the danger of getting too big? thats
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certainly a challenge that a company has. intergrading the various people, system, and product lines when they make an acquisition. the execution of the strategy when you do a acquisition is a very important. if you do not do it smoothly and efficiently you will have problems. that is probably why half of them failed. they are not good at the integration. and even though we have seen so many headlines in recent weeks about takeover bids, the pace of takeovers is not nearly where it was in 2007. yes 2007 was really frenetic. there was a lot of cheap money and a lot of debt that was available to private equity funds that are sitting on a lot of cash and the last two years have been anemic. now i think there are some acquisitions picking up but it's in specific sectors not across the board. only in those targeted regions geographically or sectors. but the fact that it's picking up is a good sign for the overall market right? yes it is absolutely. it does give you a reason for hope. part of my business is based on transactions so the more activity the busier we are. we hope that she stay very busy for the next few months or years. i do too. thank you very much for joining us john bintz,
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valuation research corporation. new numbers from thomson reuters show merger and acquisition activity has reached 530 billion so far this year that's a 15% jump from this time last year.and just last month, worlwide m&a activity hit 267 trs.
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billion that's the biggest month since june 2009.thomson reuters says the materials sector has seen the strongest growth bolstered by bhp billiton's 43 billion dollar bid for potash. up next, a speculative trade on 3-par...right after this break. we are now joined by andrew keene/independent trader. it looks like hewlett-packard has beat out dell for three par. do you think it's a done deal? the option paper is telling you it's a done deal. i have been looking at three par for the last couple weeks and on thursday i put a position on it. the volatility is basically zero it's trading at a 4 or 5 volatility. the stock is trading 3290. the 32.5 puts in october are a 10ΒΆ bid at 15. that's in march 2011. that tells you there's going to be a deal that could be done by october expiration. there's no time value for these options due to
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the fact that the deal is going to be done. i have a position that says there's a chance dell may make a higher bid. a 34 or 35 bid but the options paper is telling me the deal is basically done. would you call yourself taking that position a speculative one? yes i'm long on the 32.5 puts i'm also long sum in october and long some in march. i'm long on some stock as well it is 10ΒΆ from the deal price, it is trading 3290. the deal price is at 33 so if the deal goes out of 33 i'm going to make a little bit on my stock. i will lose on my option value. but if dell comes out and bids 34 or 35, they have raised their bid like four times already. probably will not happen but i think it's a shot i have to take because it's a very good risk reward for me. thank you very much for joining us andrew keene/independent trader. that's all the time we have for today's show thanks as always for watching have a great day and we'll see you tomorrow.
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